Portfolio Update December 2022
Navigating a difficult year of surging inflation and crypto turmoil, finishing roughly flat while repositioning for what lies ahead.
The financial markets finished strong in the final months of 2022 after a terrible six months. Financially, 2022 was not a great year — inflation raged around the world and crypto fraud finally caught up with the industry, ushering in a long crypto winter. By year’s end, it seemed a recession in the first half of 2023 was looking increasingly likely.
📊 Portfolio Performance
📊 The portfolio nonetheless held up well. It was a flat year overall with close to 0% loss — a decent outcome given the broader market turmoil. Target allocations shifted quite a lot, however, with a higher allocation in cash (driven by rising interest rates) and bonds following a round of home loan refinancing.
I managed to increase US equity exposure thanks to a recalculation of the US portion in indexed funds, plus some additional purchases.
💥 The Crypto Mess
⚠️ The crypto world was in a deep mess. Much of the sector sat in junk territory, with a string of fraudsters and tech bros running the largest exchanges. It seemed likely that confidence would take time — and additional regulation — to return. At that point I held only Polkadot and Bitcoin in a cold wallet, sitting on roughly an 80% paper loss versus purchase price. Not pleasant, but that is the nature of high-risk allocations.
🎯 Current Allocation
| Asset Class | Allocation | Target |
|---|---|---|
| Australia | 26.08% | 26.00% |
| Emerging Markets | 7.25% | 8.00% |
| US | 25.74% | 28.00% |
| International (non-US) | 13.07% | 14.00% |
| REIT | 1.91% | 2.00% |
| Bonds | 5.88% | 9.00% |
| Gold | 6.63% | 6.50% |
| Cryptocurrencies | 0.25% | 0.50% |
| Cash | 13.44% | 6.00% |
Overall, the allocation was 70% equities and 30% fixed income plus cash, or roughly 83% equities and 17% fixed income if cash is excluded.
🔮 Looking Ahead
🎯 The goal for the coming year was to add more to the fixed income allocation while trying to keep cash holdings to a minimum level. Easier said than done with a recession looming. Onward to the new year!